Management Accounting Systems and Reporting Methods

Management
Accounting

Table of Contents

INTRODUCTION
Management accounting is a technique which is used by managers in most of the
business entities for the purpose of determining the ability of company to reach all its
predetermined goals. In order to perform all the operational activities appropriately, it is very
important for all the enterprises to conduct it every year so that internal information could be
gathered to form decision for future (Abernethy and Wallis, 2018). The organisation which is
selected for this project is KPMG which is one of the leading accountancy firm in the world and
delivering services to different clients such as Excite Entertainment Ltd. It is running its
operations in leisure and entertainment industry. This report contains the subject the management
accounting systems, reporting methods, formulation of income statement by applying marginal
and absorption technique of costing it is tried to execute the importance of costing techniques.
Role of financial governance and benchmarking in management accounting is correlated to
respond financial problems effectively.
TASK 1
P1 MA systems and the requirements of various type of MA systems
Management accounting: In most of the business entities a technique is used for the
purpose of analysing, controlling and monitoring effectiveness of operations which is known as
management accounting. In Excite Entertainment Ltd., managers are focusing on it as it helps
them to determine that the efforts which are made by them are benefiting the business or not. It is
considered by them in decision making as with the help of it, actual information about
performance of company could be gathered.
Financial accounting: It is one of the recording structure that is used by large as well as
small companies to form final accounts so that actual financial status of business could be
determined. In Excite Entertainment Ltd., accounting professionals are focusing on the
formulation of financial statements so that they can analyse that whether operations are resulting
in profit or losses (Alawattage, Wickramasinghe and Uddin, 2017).
(a) Difference between management and financial accounting:
Basis Management accounting Financial accounting
Format There is no specific format to prepare In order to formulate all the final
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all the reports which are generated
under management accounting.
accounts which are formed in financial
accounting have a specific format in
which all the accounts are required to be
generated.
Compulsio
n and
auditing
For all the organisations it is not
necessary to conduct it every year as
there is no requirement of auditing for
management reports.
For all the companies, it is compulsory to
conduct financial accounting every year
as auditing is very important for final
accounts.
(b) Cost accounting systems: It can be defined as a system which is mainly used by
companies for the purpose of determining actual cost which is faced by them while executing
operational activities. In Excite Entertainment Ltd., managers are using it for the purpose of
finding causes of all the expenses which are taking place due to operations. It is essentially
required for the enterprise as it can guide the managers to determine the factors which are
resulting in higher cost. There are two types of it which are as follows:
 Direct costs: All the expenses which are directly related to business activities are known
as the part of such costs. In Excite Entertainment Ltd., managers face such costs while
promoting the concerts and festivals all around UK.
 Standard costing: It is a costing technique which is used in most of the business entities
such as Excite Entertainment Ltd in order to gather information regarding the factors
which are resulting in variation between standard and actual cost.
(c) Inventory management systems: this system is recognised by entities to manage all the
goods which are used subject to conduct operations effectively. In Excite Entertainment Ltd it is
used by managers to maintain record of all the inventories in which is being used by employees
to provide leisure to the clients (Anderson and Dekker, 2014). There are three different types of
it which are as follows:
 Last in First Out (LIFO): This can be defined as a kind of inventory valuation method
in which companies focus on those inventories which are bought in last and used first in
the production process. Such as in the Excite entertainment limited company, they are
using this technique in order to better management of their stored inventories.
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